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The Value of FinOps

Value of FinOps

Traditional IT cost management practices will not work within a cloud environment. Also, how would you link a traditional on-premises fixed expense model to the cloud environment? For a variable expense model, such as the cloud model, you only pay for what you use. Additionally, you have greater financial flexibility, agility, and innovation potential as a result. However, we’re talking about a completely different approach to cost management here. Not to worry, FinOps within the cloud world can be traced to two models: saving money and making money. 

The heart of Cloud Cost Management

To innovate is to invest to save money. Depending on the type of business case, a cloud migration can result in cost savings. Within the FinOps picture, it is important that consumption is done in a controlled and efficient manner. Avoid unexpected and unwanted spikes in consumption and make optimal use of your cloud environment. These two pillars, which make up a significant portion of the FinOps approach, primarily define cloud cost management. 

Bringing money to the table

The flexibility and the agility of cloud technology allows businesses to change the way they are working. As, for example, in the pursuit of higher productivity, growth acceleration, and/or increased profitability. This requires application and workload modernization. A business case serves as the foundation for updating existing applications or for creating totally new application scenarios. FinOps is crucial in this type of business case. This is because the FinOps team brings the data and knowledge to the table to quantify the finances of the business case in an actual way. 

A case example

One of our clients’ business units sought to provide its end users with a solution that would disrupt the market. Only cloud computing might be used to provide this service. They knew exactly what they wanted to achieve and how they intended to go about doing it, but they had not yet developed a business case, which was undoubtedly necessary to persuade the executives to support this investment opportunity. In this kind of situation, the FinOps team has a specific function.

Based on previous usage figures and business projections, the team was able to forecast future usage of this service. They were even able to create a simulation based on different levels of customer adoption for expected cloud costs. This was the basis for the business people to turn this into an initial P&L scenario.

By factoring in the cost and anticipated costs, the FinOps team assisted the design team in selecting the first high level architecture of the solution. The FinOps team integrated this particular service business case into the bigger picture of cloud spending.  That way, they were able to add additional efficiency gains into the equation.

Early on in the investment discussion, the FinOps team assisted in setting up the appropriate chargeback mechanism. In this instance, the IT division remained a cost center. This type of innovation turned that around and was a starting point to look at the IT department from a totally different perspective. Following this example, other business divisions started engaging the FinOps team as a facilitator for business alignment.

So, why FinOps in a cloud environment?

FinOps, which goes beyond just saving money, is a strategic program and practice that helps to optimize cloud utilization and preserve financial management. FinOps aids businesses in increasing productivity, enabling innovation, and creating cost responsibility and transparency. Traditional IT cost management techniques are insufficient in a cloud context, and FinOps helps control variable expenses and fully use the flexibility and agility of cloud technology. FinOps is essential for assisting businesses in creating and quantifying their financial business cases as well as for integrating specific projects into a bigger set of cloud costs in order to achieve efficiency.

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